Rough Prices Slide 24% at Petra Tender

RAPAPORT... Rough prices slumped at Petra Diamonds’ March tenders in South Africa and Antwerp as the severe slowdown in the market virtually wiped out demand.

Goods from Petra’s South Africa mines sold for 24% less than in February on a like-for-like basis, the company reported Friday. As a result, it chose to sell only 75% of the available volume — or 50% by value — and export the rest to Antwerp for future sales when conditions improve.

“During this constrained sales period, the company saw severely depressed and opportunistic bidding for its goods, particularly in the larger-size and higher-quality, greater-value categories,” the miner said.

Petra cut the tender short, ending it on March 23 instead of March 26 as scheduled, as it sensed a “rapid deterioration of market conditions, particularly due to travel restrictions, factory and retail closures, and the spread of COVID-19 in South Africa.” The sale began March 19.

Pricing at Petra’s Antwerp-based tender of rough from its Williamson mine in Tanzania, ending March 24, was on a similar level to that achieved in South Africa, the company added. However, it sold the vast majority of the available goods, holding back “only a few strategic, higher-value parcels.”

“The outlook for [Petra’s two upcoming] sales [in May and June] is highly uncertain and will depend on travel and export conditions at the time, as well as activity levels in the key diamond-buying centers, [namely] India, Israel, China and the US,” the company noted.

Separately, the company has suspended its production forecast of 3.8 million carats for the fiscal year ending June 30 until it is in a better position to assess the impact of the 21-day lockdown currently in place in South Africa. The company has scaled back operations at its Finsch, Cullinan and Koffiefontein mines in South Africa following the government’s measures to curb the spread of the coronavirus. The group is in discussions with its lenders about obtaining short-term liquidity.

Meanwhile, the Williamson deposit in Tanzania is still in full operation, but the site’s liquidity situation and ability to continue activities are in doubt due to the market situation, Petra cautioned.

“While Petra has been running well operationally, with production ahead of guidance, the scaled-down mining operations and sales disruptions will cause a negative impact in the short term,” said Petra CEO Richard Duffy.